Many investors ask how can they use a land trust when buying a short sale? Without getting to involved in land trusts lets just say the reasons for using the land trust are privacy, 1st level of asset protection, and a reduction of liability. For the record I am a big believer in both asset protection and land trusts. Continue reading Using a Land Trust in a Short Sale
Category Archives: Short Sales
Include Borrower’s Financial Statement In Package
Lenders require a Financial Statement be submitted with short sale packages to show the borrower is financially unable to pay on the loan. Always ask the seller to complete the financial statement to the best of their ability.
Continue reading Include Borrower’s Financial Statement In Package
Short Sale Repair Cost Estimates
When considering a short sale the lender must take into account the current condition of the property. If the property does not sell at foreclosure sale they will be left with the property and the decision to repair the property or to sell the property at a discounted price. As a general rule lenders do not like to invest money into REO’s and do not want to sink more money into repair costs. Continue reading Short Sale Repair Cost Estimates
Fannie Mae Short Sale Guidelines
Have you ever wanted to know the rules the loss mitigator is following when you are negotiating a short sale? Here’s the rules from Fannie Mae that should be very enlightening if you take the time to read them.
NOTE: These are merely guidelines and because a lender has a guideline does not mean it has to be followed.
HUD 1 Settlement Statement
With every short sale package the 1st and most 2nd lenders will request and estimated Settlement Statement showing how much they are going to receive from the short sale. The two things the lenders are most interested in is
1) how much are they going to receive and
2) that the seller does not get any money. Their position is simply this: We’re taking a loss on the loan so the seller better not get anything. Continue reading HUD 1 Settlement Statement
Power of Attorney
Lenders will request a signed Authorization Form from the seller before communicating with you. You are much better off using a Limited Power Of Attorney(POA) instead! Continue reading Power of Attorney
Short Sale Offer & Explanation
This is part of an abundance of evidence to support your short sale offer. Be sure to Include the following: Continue reading Short Sale Offer & Explanation
Short Sale Hardship Letter
The sadder the hardship letter, the better. The goal of the letter is to bring tears of sadness to the readers eyes with a statement of facts written by the owner describing how they got into the financial bind. The owner should make a plea to the lender to accept less than full payment and to work with you (your name) on the short sale.
Loss mitigators are not inhumane and can understand if you lost your job, were hospitalized or a truck ran over your entire family. Lenders are not empathetic to situations involving dishonesty or criminal behavior.
The letter below from Indymac (now defunct) does a great job of guiding the owner. Our software utilizes the same format and includes instructions to the owner for completing a compelling hardship letter.
THIS IS A SAMPLE HARDSHIP LETTER:
More information on Short Sale: Sample hardship letter (of course, each situation if different) your seller should be able to tell you why they are in a critical condition and why they need to short sell their home.
Lender Name Lender Address Lender’s fax number
Today’s Date
RE: Hardship Letter – Short Sale for _____________________ address
To whom it may concern:
I purchased my home at _____________ in ___________. At that time I was employed by _______and business was very good. My salary and the possibility of a promotion and raise made me sure that I could easily support my mortgage. Unfortunately, a downturn in the market caused my company to reduce its workforce and I was laid off.
After searching for a comparable job, I finally got a temporary position as an office assistant as I continuing seeking other work. I struggled for several months to make my mortgage payment, and was also hit with some medical payments that I did not expect (the COBRA payment was more than twice what I was paying when employed). I knew I would have to sell my home to protect my credit rating and possibly have enough cash left over for moving expenses and some savings. I put my home up for sale by owner in _________, but there were several problems that I did not have enough money to fix, such as the broken fence in the back yard and some pretty severe leaks in the roof which indicated a new one was needed. Over the next three months I lowered the price three times but still had no takers. I am now working with a real estate agent and I believe she will be able to help me sell quickly.
I really love my house, but I know that I cannot afford it. I am a single parent, working as a temporary employee with few benefits and no savings. My financial situation cannot sustain a home mortgage of nearly $2200 per month. I want to sell the home, avoid foreclosure and salvage my credit. I know that a foreclosure on my record will affect me for years to come. I would ask that you please assist me in avoiding this.
Please accept this offer as payment in full. My attorney has advised me to file bankruptcy, but I prefer to avoid further destruction of my credit. I just want to move on and start over.
I deeply appreciate your help and understanding in this matter. If you have any questions, or need anything further from me, please contact my agent or me personally.
Sincerely, Home Owner Name Address and Contact Information
Short Sale Standard Purchase and Sales Agreement
The purchase and sale agreement is a signed contract between you and the owner of the property stating the terms and conditions of the sale. The purchase and sale agreement should include the following statement or one very similar:
Continue reading Short Sale Standard Purchase and Sales Agreement
Short Sale Letter To The Lender
Approach a short sale as if you are an attorney preparing for a big case. It is your job to provide and abundance of evidence to support the lender accepting your short sale. It should be your goal to do the lender’s job for them thereby making it easy to accept your short sale offer.
The sad truth is the lenders are understaffed and dealing with short sales is a tremendous challenge. In recent years the markets were strong and many lenders eliminated most of their loss mitigation departments and are scrambling to put the proper people in place. You need to realize that most loss mitigators lack experience and the ability to reason logically through the alternatives.
With a lack of experienced loss mitigators the lenders have put in place checklists and guidelines for their employees to follow. Because of this you will likely meet resistance if the loss mitigator can not “check the box” to show something has been provided no matter how idiotic the request. Just recognize the loss mitigator is looking for ways to check of little boxes and it will help you with the process.
Now that you have a better understanding of the loss mitigators you will be working with it should help you realize the importance of putting together a great short sale package. It all starts with the Letter To The Lender.
Letter To The Lender
The letter you want to create include the following:
- Loan Number. Without a loan number nothing exists in the lender’s world.
- Foreclosure date. If the foreclosure date is know list it in a bold print that is easy to find.
- Borrowers name.
- Property Address.
- Borrower’s situation. Include a short paragraph about the borrowers situation. Example: Due to extreme personal and financial circumstances Joe Jones has been unable to meet his financial obligations.
- Borrower has requested to work exclusively with you.
- Reference your Power Of Attorney
- The Property is Over financed.
- Falling Real Estate Market. Go into detail if you can. Create a standard doom and gloom paragraph for your area and use it in all of your short sales.
- Discuss lenders position. Empathize with their position. Acknowledge they do not want to get the property back as an REO.
- Difficult Situation for all parties.
- Short Sale Offer. State your offered price as payment in full.
- Mention deed is in escrow. This politely tells the lender you are in control of the property.
- No Listing Agreement Provided. State the reason why. This allows the loss mitigator to check off one more box.
- Your contact information.
- A list of the documents included in your short sale package
The letter I use covers all this and a little more in less than two pages. It will serve you well to spend some time creating the right letter or using our software HERE
The Short Sale Package
What To Include In A Short Sale Package
Here's a quick checklist from our software of the items you should provide when submitting a short sale to the lender.
Do I Need A Real Estate Agent
A real estate agent is NOT needed for a short sale. The sad truth is most real estate agents will unknowingly hurt you in a short sale because they do not know or understand the short sale process. Just by reading the information at this website your knowledge is superior. Unless a Realtor is already involved in the transaction you’re better off without one.